Whether their operational strategy is dominated by the patient-centered medical home, the ACO model, or other clinical integration strategies, hospitals and health systems are moving heavily into acquisition of physician practices.

In many cases, leaders perceive such acquisitions as a bulwark against revenue declines and a source for continuing referral patterns, despite sometimes steep financial losses from the practices themselves. Meanwhile, lower-level primary care is being commoditized by retail clinics and urgent care clinics operated by drugstore chains or even Walmart.

Although hospitals often lose money operationally on physician practices, hospital leaders feel they can justify employing the physicians because of the downstream revenue. But with low-cost providers nipping at practice revenue and reimbursement pressures bearing down on high-end inpatient services, hospitals and health systems are getting squeezed at both ends of the revenue spectrum.

To survive in the long term, they know they must effectively integrate a number of healthcare services. In other words, they must add value. But how?

Hospitals have begun to think strategically of low-end services as led and managed clinically by them and physicians who are clinically integrated with their care protocols, but they are increasingly interested in providing more care with physician assistants and nurse practitioners as part of a care team. Getting to the end state likely means gambling on lots of steps and complex revenue sharing, but leaders have little choice but to transform. Execution will be the key.

A brief window of opportunity

Almost 1,400 store-based clinics operate now in the United States, mostly in urban and suburban areas. The only substantial requirements: a nurse practitioner, a self-check-in system, and a storefront. Right now, in most communities, such locations complement rather than directly compete with primary care practices.

"There's enough demand for primary care that in most markets the docs aren't feeling the direct impact of these clinics," says Paul Keckley, executive director of the Deloitte Center for Health Solutions, the health services research arm of Deloitte LLP.

But that will change relatively quickly, Keckley says. "There's a race to own the front door to revenue, and that's primary care."

Right now healthcare access, especially in primary care, is constrained. But when most states' Medicaid rolls expand next year under the Patient Protection and Affordable Care Act, and as health insurance becomes a requirement under the same statute, the journal Health Affairs says the demand from this influx of insured patients will mean the nation will require an additional 7,200 primary healthcare providers, 2.5% more than the current supply.

As the system digests the demand for more primary care, a brief window of cooperation opportunities is open for hospitals and health systems to work in partnership with store-based clinics as they seek trusted local partners to help supervise their nurse practitioner and physician assistant storefront practices.

Some already have an urgent care or retail strategy on their own but also see a need to partner within the next three to five years. Michael Murphy, UnityPoint Health's senior vice president for population health strategy, is in the developmental stage of such partnerships even though the health system owns a group of 15 urgent care clinics in its top metro areas of Des Moines, Cedar Rapids, and the Quad Cities, among others.

"We need to move to team-based care where physicians are working with high-risk patients," he says. "An increase in the insured population will start challenging our primary care access models significantly."

Murphy contends that partnerships with low-end providers such as urgent care clinics need not be seen as dilutive to the health system, but instead as another entry point for patients.

"Everyone is concerned about these places taking their business away, but the challenge of primary care is you're always going to have innovation and low-cost providers trying to nip at low-risk easy-patient interaction," he says. "But at the same time, we also look at where the spending is and where the population is moving to. The majority of costs is 55-plus."